E-commerce and digital payments company, Paytm is targeting to go live with its payments bank post Diwali. The firm, which earlier hinted at an August and then – when the date passed – a November launch, is in the final leg of approvals from RBI.
India’s banking regulator had granted an in-principle ‘payment bank license’ to 11 entities including Reliance Industries, Vodafone, Airtel, Paytm, among others in August 2015. Since then, three have dropped out raising concerns over the viability of the business, but Paytm’s, Vijay Shekhar Sharma is confident about his business model.
“We are in the final process of completing the formalities and handing over the final applications to the RBI. The internal systems, strategies and processes are in place and we should be able to launch the payments bank post Diwali,” Founder and CEO Vijay Shekhar Sharma, told Indiaretailing Bureau.
The firm – which started operations with digital wallet and soon diversified into a marketplace model – believes that unlike traditional banks, payments banks cannot rely on making money from loans and thus it’s important to have different revenue streams for both acquiring customers and making money in the long run.
“Our business model is built across a principal that consumers come with baggage and we give them three use cases; one is payments, second is commerce and third is financial services. We are already making money on a standalone basis through our other services, so even if a payments bank business is not making enough money, the other transactions will support it before the money starts flowing in,” Sharma said.
A payments bank can accept deposits of up to Rs 1,00,000 per customer and can facilitate payments electronically or by issuing ATM cards, but it cannot extend loans.
The company has also clearly defined the consumer base that it aims to target via its payments bank.
“So, we are going to target two set of consumers; first those who are smartphone savvy and than those who are still un-banked. For instance, we already have large user base who are using Paytm wallet to make transactions, these will get additional features like saving accounts, without having to do anything, and will automatically start earning interest. And then we will offer feature phone or no phone requirement banking facility to consumers who do not even have a bank account yet,” Sharma explained.
Paytm currently has 135 million users across 20 cities (mostly Tier-I and Tier-II) on its digital platform. There are nearly 800,000 outlets that use the payments platform which include kirana shops to auto-rickshaws, taxis and others.
Not in a saving accounts rate war
Unlike commercial banks, Sharma said that he is not in a game to woo customers with higher interest rates on savings accounts, instead the company is working on some value-add services that will lure customers to use their banking services.
“I don’t think we can fight the numbers in the savings bank account interest rate business because there is a market rate. What we can offer is the superior product by adding lot of value add features like Wealth management. We are building a tool by which consumers who have saving accounts with us can get a wealth management services in just a click,” said Sharma.
Paytm is in talks with banks and financial services companies to offer financial products.
The RBI’s primary objective to set up payments banks is to ‘further financial inclusion’ by providing small savings accounts and payment and remittances services to those with little access to traditional banking services, such as migrant labour, small businesses and low income households.
A payments bank can accept deposits of up to Rs 1,00,000 per customer and can facilitate payments electronically or by issuing ATM cards, but it cannot extend loans. The banks are also not allowed to use their deposits for lending.